The idea was ambitious when Montgomery County Executive Isiah Leggett pitched it in 2008: transform 90 acres of county-owned industrial land at the Red Line’s Shady Grove terminus into a transit-friendly urban village.

Leggett’s Smart Growth Initiative would be a break-even proposition for taxpayers over time, he said, and might even make money as the county got an attractive new residential neighborhood and replaced outdated warehouses and garages with state-of-the-art facilities elsewhere.

But nearly a decade in, as Leggett (D) nears the end of his 12-year tenure, this signature project has not gone forward as expected. Only a fraction of the money anticipated from land sales to private developers has been paid so far. And the county’s difficulty in finding a new site for a school system bus depot has slowed progress on a major portion of the planned Shady Grove community, including a new park and elementary school.

Critics on the Montgomery County Council say Leggett overpromised and underdelivered, adding to the county’s $3.2 billion debt by borrowing against land sales proceeds that have yet to materialize.

“This is just not a good news story,” said Council President Roger Berliner (D-Potomac-Bethesda), one of three council incumbents running for county executive in the 2018 Democratic primary.

But Leggett says he devised a creative way to replace outdated buildings and pursue transit-
oriented development policies far more quickly, and effectively, than had been done in the past. Even his own staff was skeptical, he recalled in an interview.

“I was the sole person who believed we could move all these pieces,” he said. “You can argue that a few dollars didn’t come in at the precise time. . . . The county comes out far ahead in the long term.”

In Leggett’s calculus, proceeds from land sales to private developers, along with fresh tax revenue from the new construction, would eventually pay for relocating and rebuilding outdated facilities in Shady Grove and elsewhere. There would also be savings from exiting costly leases the county was paying to rent some of the old structures.

After nearly a decade, parts of that vision have been realized. Along Crabbs Branch Way, within walking distance of the Shady Grove Metro station, the first of a planned 400 new townhouses and 1,100 apartments — some subsidized, some market-rate — are sprouting up where a school system food distribution center, a liquor warehouse and maintenance garages for Ride On buses once stood.

Those facilities and others, including the police and fire training academy, have been successfully moved and rebuilt on other county land.

But those relocations got more expensive as the county expanded the scope of the projects and made state-of-the-art improvements.

Changes in menus and increased emphasis on fresh food, for example, added $9 million to the $35 million school center. Advances in training methods raised the police and fire academy price tag by $15 million, to $63.1 million. All told, the cost of the replacement buildings increased by $60.8 million.

At the same time, Leggett narrowed the county’s expected revenue stream by changing Montgomery’s original agreement with EYA, developer of the townhouses and apartments on the west side of Crabbs Branch. The county initially expected to collect $103.8 million from EYA in fiscal 2015, according to a 2012 fiscal summary drawn up by Leggett’s office. But Leggett decided to allow EYA to pay incrementally as portions of the 45-acre site were built, in order “to help them with their cash flow.”

To date, the county has collected slightly more than $2 million from EYA, which has completed about a quarter of the Westside at Shady Grove project. On the other side of the ledger, the county has benefited from $19 million worth of roads and other infrastructure built by the company. It also credited the company with $4.5 million in exchange for building additional affordable and workforce housing.

 

Leggett has also strategically held certain parcels of county land back from the open market, believing that waiting will result in a better deal.

Five years ago, Montgomery struck an agreement with the developer Hines to convert the old public safety training academy on Great Seneca Highway in Gaithersburg into a life-sciences complex with companies and housing. Leggett placed the $70 million project on hold in hopes of luring a major cybersecurity center to the 50-acre site. That possibility is now less likely. The project has been placed back out for rebidding.

Most vexing for Leggett has been the difficulty in finding a new location for 400 county school buses kept in a 35-acre depot opposite the new townhouses on Crabbs Branch Way. The county agreed in 2012 to sell the land for $70 million to developers LCOR and NVR.

An initial plan to put some of the buses at the Carver Educational Services Center on Hungerford Drive drew sharp neighborhood opposition. Compounding the issue is overcrowding at all five MCPS bus depots. With no obvious available option, Leggett this spring ordered a study before he decides what to do about the Shady Grove depot. It is likely to delay development by 12 to 18 months more, at least, he said.

Council member George Leventhal (D-At Large) said it was “not good planning” to jump into the development venture without knowing where the depot would be moved.

“I don’t think it’s something we can foist on a community just to transform a Metro station,” said Leventhal, also a candidate to succeed Leggett as county executive.

The Shady Grove initiative has generated an unexpected level of debt. Most big capital improvements, such as roads and schools, are financed through the sale of general obligation bonds, where principal and interest are usually paid off over 20 years. But the Leggett administration, interested in moving quickly and anticipating that land sales proceeds would soon be in hand, kept the smart-growth projects out of the capital budget, opting instead to use $200 million in short-term loans on which it paid only interest. Such interim financing is meant to be retired quickly, to avoid added expense for taxpayers. But the county is still carrying a balance of about $160 million.

“These are hard decisions,” said council member Marc Elrich (D-At Large), another county executive candidate. “It was somewhat of a gamble, and it hasn’t turned out entirely the way everybody thought it would turn out.”

Looking for funds to pay off some of the debt, Montgomery officials announced last month that they may use the $22 million netted from settlement of the county’s lawsuit against the designer and builders of the Silver Spring Transit Center.

The county could also sell more bonds to convert the debt from short-term to long-term. But that would crowd out other construction projects in the capital budget, which caps new bond debt at $340 million annually.

Stewart Schwartz, executive director of the Coalition for Smarter Growth, and the region’s leading advocate for building most densely around mass transit, said despite the financial issues, the long-term benefits to the county remain significant.

“Given the growth that’s coming to the region,” he said, “the county needs to take as many opportunities like this as possible, so we don’t choke on our traffic.”

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More than a dozen nonprofit organizations are backing the call for dedicated funding for Metro — and soon — saying that without it, the system risks further deterioration and drastic service cuts.

The 18 groups say they are aligning with the region’s business community to secure reliable, bondable annual funding stream for Metro, which stands alone among large subway systems in its lack of a significant source of dedicated funding. Business leaders from 21 regional chambers of commerce and employers’ groups issued a plea last week for dedicated funding and a restructuring of the system’s governing board.

Now, the nonprofits are adding their voice to the mix — highlighting the system’s importance to the region and the potential for further service reductions as key considerations in the fight. The groups, including the Coalition for Smarter Growth, the Sierra Club and the League of Women Voters, released a Statement of Principles in March endorsing dedicated funding and calling Metro “crucial for the economic health and sustainability” of the region.

“Going ahead, it’s gonna take both the business community, with their clout, and the nonprofit community, with our membership, to keep this focus on saving Metro and to win the funding the system needs,” said Stewart Schwartz, executive director of the Coalition for Smarter Growth, which is leading the nonprofit groups’ charge.

The nonprofits break from the business groups and some political officials, however, by eschewing immediate calls for an overhaul to the system’s governing board, though they support structural reforms. Schwartz said the Coalition for Smarter Growth is awaiting the release of a fall study by former transportation secretary Ray LaHood, which is expected to include recommendations on the system’s governance.

Metro General Manager Paul J. Wiedefeld has asked for $15.5 billion over 10 years for capital needs — including $500 million in new dedicated funding annually — and concessions from the transit agency’s unions. Wiedefeld also broadly supports the demand that board members have a singular fiduciary duty to the transit system, which business groups and some officials have called for.

Republicans in Virginia have said any increases in funding should be tied to labor and governance reforms.

“The one thing we don’t want to see is we don’t want to see political gridlock over structural and governance issues that end up delaying or endangering the additional funding the system needs,” Schwartz said.

The nonprofits say state and local jurisdictions should prevent Metro from falling into a “death spiral” by providing the funding it needs and ensuring frequent and reliable service. Budget woes, stemming partly from lower-than-expected ridership, forced Metro to raise rail and bus fares and reduce service frequency on five of six lines beginning this week.

Nancy Soreng, co-chair of a Metro working group of the League of Women Voters of the National Capital Area, said it’s up to regional leaders to determine how to reform the system’s governance and labor but that funding can’t wait.

“The most urgent thing for us is to get the three jurisdictions to agree on a dedicated funding source,” she said. As for structural reforms: “That’s a battle that we’re going to stay out of, and we’re going to let the politicians sort that out.”

Soreng was quick to note that the League of Women Voters has endorsed a sales tax for Metro since at least 1980, as the group’s website reflects.

“A sales tax which excludes such necessities as food and medicines would be the best means of financing mass transportation in the metropolitan area,” it points out. A regionwide sales tax, endorsed by a technical panel of the Metropolitan Washington Council of Governments, is among the funding mechanisms regional leaders are weighing. Soreng said her group is open to other means of raising the money if the region can agree on them.

The Coalition for Smarter Growth stopped short of advocating a specific funding mechanism.

“We believe that the jurisdictions should commit to a level of funding and then find the mechanisms that work best for each of them,” Schwartz said.

The nonprofits are calling for dedicated funding to be established by the conclusion of the fiscal year next June.

“Waiting any longer means that capital costs could rise, you could fall further behind in the capital restoration in the system,” Schwartz said. “The operating gap could increase further, and there could be more service cuts.”

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The Coalition for Smarter Growth celebrated its 20th anniversary last week at an event that captured the diverse coalition helping to shape a more sustainable path for regional growth. Founded in 1997 by the D.C. region’s leading regional conservation groups, CSG today partners with housing, transit, and bicycle/pedestrian groups, neighborhood activists, the development, architecture, and planning sectors, and local governments to promote mixed-use, mixed-income, transit-oriented development.

We’ve supported millions of square feet of development and tens of thousands of housing units in smart growth locations. We’ve also pressed for the policies necessary for these projects to be sustainable and inclusive, including good design, reduced parking, affordable housing, “complete streets” designed to be safe for all users and modern stormwater management. The market has responded:

• 86 percent of new office development is within ¼ mile of Metro;
• Marriott, Nestle, Hilton, Choice Hotels, and many other corporations are moving to Metro station locations;
• The JBG Cos. and Vornado Realty Trust are merging and concentrating their entire portfolio at Metro; and
• D.C. has added 120,000 new residents over the past 12 years.

Fairfax County Board Chairman Sharon Bulova has said “transit-oriented development is Fairfax’ future.” So have leaders of most other jurisdictions, who have incorporated transit-oriented development as the core of the Council of Government’s Region Forward vision plan.

We’ve learned a lot along the path:

• The demand for convenient urban living has helped revitalize neighborhoods but also created major affordability challenges. We need more housing closer to jobs, bigger housing trust funds, inclusionary policies, and more rapid planning and zoning changes – especially for commercial strip corridors.
• Neighborhoods are concerned about rapid change and the addition of medium- to higher-density development. We need everyone at the table in planning for the future, excellent architecture, community benefits including town greens and pocket parks, and parking reform and demand management to ensure walking, biking, and transit are the predominant travel modes.
• Partnerships are critically important. We would not have made this much progress without working with other nonprofits, smart growth developers, progressive architects and land use and transportation planners.
• Transportation planning changes far too slowly and too few recognize the limitations of highway expansion – that new highways and additional lanes induce travel pattern changes and more auto-dependent development which fill up the new lanes in as little as five years.
• Pricing matters – low gas prices and free or reduced-price parking encourage longer commutes and more driving while adding to congestion, while higher gas prices, market-priced parking, and affordable, frequent transit encourage transit use and living in walkable, transit-oriented neighborhoods.
• Leadership by elected officials, local planners and the private sector is essential. That’s why our annual award event recognizes the critical role of our democratically elected leaders, the technical skills of local planners, and the commitment to well-designed projects by the private sector.

Our region faces challenges, which we intend to help tackle in the same spirit of partnership that got us here. These include Metro’s aging infrastructure and a transit funding crisis, ongoing neighborhood concerns about medium and higher density development near transit, housing affordability, and the urgent need to reduce the greenhouse gas emissions that fuel climate change.

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